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Modeling Property Tax Expenditures

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Christopher Carr

Hello!

I’m modeling the operations of a solar generating facility, and a major component of its annual operating expenditures is property taxes. I have annual estimates for property tax payments over the facility’s full 35-year operational period. I’m interested in producing results that reflect both one year of operations and the full 35-year period. How can I best incorporate this property tax information to make the fiscal impact section more accurate, without overstating or distorting the overall economic or fiscal impact results?

Thanks!

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    Whitney McKinzie

    Hello,

     

    If you are trying to model property taxes 35 years into the future and assume that property taxes are the same for each year, the easiest way to model this is to utilize an Industry Impact Analysis (Detailed) Event type. Our Where’s the Tax support article discusses the different components of taxes. You would need to take the Taxes on Production and Imports (TOPI) value located in Region Details and subtract the current property tax value. On top of this difference, you would add your annual estimate for property taxes and input that value into TOPI in the Industry Impact Analysis (Detailed) Event. You would then be able to multiply your tax results by 35 to obtain the total impact over the 35 years.

     

    If your annual property tax estimates are not the same, you would have to do the same steps as above (minus the multiplication) for 35 different Events, each event denoting the property tax values.

     

    We recommend that you use caution when conducting an analysis 35 years into the future, as the economy continuously changes, and the economy in 2023 will most likely look vastly different to the economy 35 years from now.

     

    Best, 

    Whitney McKinzie

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    Christopher Carr

    Hello!

    Thank you for the response, I have my follow up below.

    To confirm, I obtained the total value for TOPI in San Bernardino County (Region of study) which was $11.1 billion and the Property Tax portion which was $4.0 billion and found out the portion of that was 35.62%. I then went to the industry I am modeling in (37) in San Bernardino County and applied the 35.62% to total TOPI $18.1 Million to get the part that was property tax $6.4 Million. I then subtracted $6.4 Million from $18.1 Million, and dded in my own estimate for property taxes $6.3 million which equals $17.9 Million. In my event I would then model $17.9 Million in TOPI to get my desired property tax results?

    My next question is now that property tax is correct the other TOPI categories have been scaled up as well, is it correct to duplicate the model, run TOPI as blank and use the blank models TOPI results for all categories except property tax? There will also need to be adjustments made to direct output, how should that be addressed.

    Best,

    Chris Carr

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    Nadege Ngomsi

    Hello,

    Your calculation and your approach are correct ($18.1M - $6.4M + $6.3M = $17.9M), however, duplicating your event will not yield a more accurate approximation. As Whitney mentioned, you can input this $17.9M value directly into the TOPI field of your Industry Impact Analysis (Detailed) Event.

     

    Inputting the $17.9M will cause IMPLAN to apply its LPF to that new total, which will scale down all the other tax categories (like sales tax, excise, etc.) proportionally. This is a tradeoff of IMPLAN, so recommend using the $17.9M value.

     

    Regarding your second question, you can only adjust Direct Output indirectly, not directly.  The Industry Impact Analysis (Detailed) event, which you are already using can help with this. Within that same event, you must enter your other known components for the facility, such as: Employee Compensation (payroll) and Employment (job count).

     

    The model will then take your known inputs, including your $17.9M TOPI,  and rebalance the industry's entire spending pattern, calculating the new, correct Direct Output for you.

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